DISCA/DISCK - Discovery Communications

[KJP]

Is Verizon in a much better position to compile this bundle than T-Mobile or Amazon?

T-Mobile, for example, is already "bundling" Netflix and offering the fat version of the TV bundle:  https://www.t-mobile.com/tvision

More broadly, T-Mobile has Netflix and Pandora.
Verizon has Disney+ and Apple Music.

My post is already out of date:  https://www.t-mobile.com/news/un-carrier/turns-out-tv-is-better-with-friends

[changegonnacome]

Is Verizon in a much better position to compile this bundle than T-Mobile or Amazon?

T-Mobile, for example, is already "bundling" Netflix and offering the fat version of the TV bundle:  https://www.t-mobile.com/tvision

More broadly, T-Mobile has Netflix and Pandora.
Verizon has Disney+ and Apple Music.

My post is already out of date:  https://www.t-mobile.com/news/un-carrier/turns-out-tv-is-better-with-friends

Very interesting - looks like Verizon needs a live TV streaming partner quick smart

[LearningMachine]

Is Verizon in a much better position to compile this bundle than T-Mobile or Amazon?

T-Mobile, for example, is already "bundling" Netflix and offering the fat version of the TV bundle:  https://www.t-mobile.com/tvision

More broadly, T-Mobile has Netflix and Pandora.
Verizon has Disney+ and Apple Music.

My post is already out of date:  https://www.t-mobile.com/news/un-carrier/turns-out-tv-is-better-with-friends

Very interesting - looks like Verizon needs a live TV streaming partner quick smart

Thanks KJP for sharing. I had seen a negative article maybe related to the same news?

https://www.theverge.com/2021/3/29/22356978/t-mobile-tvision-live-plus-zone-shutting-down-youtube-tv


In any case, to answer KJP's question, I do believe Verizon has more monopsony power than T-Mobile to negotiate these deals because of its big customer base that is less price-sensitive.  T-Mobile's customer base on the other hand is value-focused customer that can't be monetized as much.  It is also because of the quality of the network.  Apple knows how different the bar is between T-Mobile and Verizon when getting a device certified for the network.  For example, one of the criteria would be something like the scenario that out of a million incoming and outgoing simultaneous calls on a device, do any get lost, and if yes, how many?  Businesses know how different the bar is between T-Mobile and Verizon in terms of monitoring of the network and jumping on issues before even customers notice them.

As it relates to Discovery in this thread, Verizon is already their exclusive partner.

In this Google deal, we don't know how much of the economic value T-Mobile has squeezed out of Google and how much of its own money T-Mobile is throwing in to provide discount.

Verizon mentioned that they have lots of streaming providers asking them to be included in Verizon's bundle, but they are being super-selective currently on top brands and the economics of the deals, and saying NO to a lot of streamers.

It doesn't look like T-Mobile squeezed an exclusive out of Google or even tried.  Verizon probably won't be able to squeeze an exclusive out of Google either, but I think they will have more power to negotiate a better deal with Google.  Look, what they did with Apple - they had Apple give them big chunk of their iphone launch time, got Apple to promote Verizon, and got Apple to include Apple Music in Verizon bundle. 

I don't think T-Mobile has the monopsony power to negotiate the same level of deals with Apple, Disney and Discovery that Verizon has been able to pull off.

[samwise]

Who is buying the A shares instead of the K shares at the current valuations? And what are the motivations or investment mandates that are driving that decision?

My understanding is that there is no economic difference between the share classes. The only difference is the A shares have 1 vote per share while the K shares have no votes per share. Nonetheless, voting control is maintained by the super voting B shares and convertible preferred stock. John Malone and Advanced/Newhouse combine for 43% of voting power. Therefore the A shares 1 vote per share is of limited value.

Add me to list of confused people. I see the following:
B shares $77 (10 votes)
A shares $44 (1 vote)
C shares $36-37 (0 votes)

Are votes this valuable?

[Jurgis]

Who is buying the A shares instead of the K shares at the current valuations? And what are the motivations or investment mandates that are driving that decision?

My understanding is that there is no economic difference between the share classes. The only difference is the A shares have 1 vote per share while the K shares have no votes per share. Nonetheless, voting control is maintained by the super voting B shares and convertible preferred stock. John Malone and Advanced/Newhouse combine for 43% of voting power. Therefore the A shares 1 vote per share is of limited value.

Add me to list of confused people. I see the following:
B shares $77 (10 votes)
A shares $44 (1 vote)
C shares $36-37 (0 votes)

Are votes this valuable?

A and C prices fluctuate. There is usually no rhyme or reason why. When As are more expensive, people say "votes". When Cs are more expensive, people say "liquidity".
If you are long-term holder, you can make some money swapping back and forth. I did that in the past with various Liberties that have multiple share classes. No longer hold any Liberties, so that's water under bridge.

[dwy000]

Who is buying the A shares instead of the K shares at the current valuations? And what are the motivations or investment mandates that are driving that decision?

My understanding is that there is no economic difference between the share classes. The only difference is the A shares have 1 vote per share while the K shares have no votes per share. Nonetheless, voting control is maintained by the super voting B shares and convertible preferred stock. John Malone and Advanced/Newhouse combine for 43% of voting power. Therefore the A shares 1 vote per share is of limited value.

Add me to list of confused people. I see the following:
B shares $77 (10 votes)
A shares $44 (1 vote)
C shares $36-37 (0 votes)

Are votes this valuable?

A and C prices fluctuate. There is usually no rhyme or reason why. When As are more expensive, people say "votes". When Cs are more expensive, people say "liquidity".
If you are long-term holder, you can make some money swapping back and forth. I did that in the past with various Liberties that have multiple share classes. No longer hold any Liberties, so that's water under bridge.

Wonder if Archegos was playing the spread (long C, short A) and this is the unwind.  With the low liquidity in the A shares, closing out that short could make the price skyrocket.  Just a guess.

[changegonnacome]

Who is buying the A shares instead of the K shares at the current valuations? And what are the motivations or investment mandates that are driving that decision?

My understanding is that there is no economic difference between the share classes. The only difference is the A shares have 1 vote per share while the K shares have no votes per share. Nonetheless, voting control is maintained by the super voting B shares and convertible preferred stock. John Malone and Advanced/Newhouse combine for 43% of voting power. Therefore the A shares 1 vote per share is of limited value.

Add me to list of confused people. I see the following:
B shares $77 (10 votes)
A shares $44 (1 vote)
C shares $36-37 (0 votes)

Are votes this valuable?

A and C prices fluctuate. There is usually no rhyme or reason why. When As are more expensive, people say "votes". When Cs are more expensive, people say "liquidity".
If you are long-term holder, you can make some money swapping back and forth. I did that in the past with various Liberties that have multiple share classes. No longer hold any Liberties, so that's water under bridge.

Wonder if Archegos was playing the spread (long C, short A) and this is the unwind.  With the low liquidity in the A shares, closing out that short could make the price skyrocket.  Just a guess.

Some pure irrational pricing discrepancy between the share classes for sure.

However i see it as an explicit market indication that Discovery remains 'in play' as an acquisition target..........its global IP/content library is hugely valuable to someone & the fog of war going on in the media industry to create a global scale DTC service to rival Netflix/Disney is in its infancy.......voting rights in this context for large holders become important

[gfp]

Well this trade is being blown out big-time.  Class B trading 107, class A: 42.91, class K: 36.28

[gfp]

Have we lost the ability to edit posts?  Anyway, "class K" above should read "class C"

[kh812000]

DISCB shares up 100% today

DISCA Shares up 1%.

 

B looks like a major short squeeze.....

[Spekulatius]

31 minutes ago, kh812000 said:

DISCB shares up 100% today

DISCA Shares up 1%.

 

B looks like a major short squeeze.....

LOL

Votes: - Almost worthless (because this is a controlled company)

Low float /short squeeze: - Priceless

[ContrarianValue44]

Hey everyone! I'm relatively newer to the media sector and was wondering why people believe that at today's DISCA price it is more attractive than Viacom. Thanks in advance for your inputs!

[dabuff]

DISCA seems to have more volume compared to DISCK. Is there any reason to own DISCA over DISCK with such price discrepancies other than wanting voting privileges?

[wabuffo]

https://www.bloomberg.com/news/articles/2021-05-16/at-t-is-said-in-talks-to-combine-content-assets-with-discovery-kor6r2uj

AT&T Is in Talks to Combine Content Assets With Discovery

wabuffo

[wabuffo]

https://www.wsj.com/articles/at-t-in-talks-to-combine-media-assets-including-cnn-with-discovery-11621183450?mod=hp_lead_pos1

From WSJ reporting:

Quote

AT&T is in talks to combine a big portfolio of media assets, including CNN, with Discovery Inc....

The talks, which cover CNN and other parts of AT&T’s WarnerMedia division, including the TNT and TBS cable channels, are advanced, and an agreement could be reached by Monday, the people said. Should there be a deal, AT&T shareholders would own a big stake in the new entity, some of the people said. The people cautioned that a deal isn’t done yet and the talks could still fall apart. Other details of the potential transaction couldn’t be learned.

wabuffo

Edited May 16, 2021 by wabuffo

[hasilp89]

You beat me to it same thing in the FT. 
 

https://www.ft.com/content/5aeba5f9-2e00-4cba-b9c7-e0431aad798b

 

$150bn TEV - disck currently at $37, tw was bought around $80

 

 

 

[dwy000]

9 hours ago, hasilp89 said:

You beat me to it same thing in the FT. 
 

https://www.ft.com/content/5aeba5f9-2e00-4cba-b9c7-e0431aad798b

 

$150bn TEV - disck currently at $37, tw was bought around $80

 

 

 

If it is (as contemplated by most) a reverse Morris trust spinout from T, I wonder how this will impact the T dividend.  They certainly can't keep the same level without eliminating substantial share count. 

[Xerxes]

Three comments:

- it seems/looks to be structured the same way that GE-Aercap deal was done, with GE keeping equity (upside). Not a direct sale. AT&T will keep skin the consolidate entity.

- AT&T and Verizon both are going shedding similar assets

- I wonder if this would have come earlier if it weren't for Archeaos' pushing up the value

[ANP301191]

Just looking at it from the point of view of what the FT says will be sold - I think the resultant streaming player will be a significantly stronger than anyone other than Netflix and Disney. May lead to more consolidation with other streaming player, specifically waiting to see what Comcast does.

From a consumer point of view, I understand that cable bills in the US may be higher than having multiple subscriptions, but its a pain to have to keep a track of which shows are on which platforms, so this should help. Or maybe its just that I am lazy.

[vince]

anyone see the info needed to know what the pf equity and enterprise value are?

[hasilp89]

presentation on the deal and call this morning.

Rough value for DISCK shareholders - 10x on PF 23 $14B EBITDA -  $140TEV. less $15B of DISCK Debt less $43M of ATT Debt - Equity value of $82M - 29% is DISCK = $24M - similar to today? Assuming I'm missing something.

https://s27.q4cdn.com/187472364/files/doc_presentations/2021/ATT-Discovery-WM-05172021-FINAL.pdf

 

 

[peridotcapital]

They are guiding to 5x leverage at close and 3x 24 months later. If you want to value the new entity at 10x EBITDA, you would get $43.50 per DISC share in mid 2024. The better stat is that FCF is so robust that such a price is only 11x FCF (a 1x spread between those metrics is pretty rare) so buybacks will be huge, just as they have been at legacy Discovery historically. 12x EBITDA and 14x FCF gets you to $56 per Newco share by my math, which might be the high end/bull case.

[hasilp89]

2 minutes ago, peridotcapital said:

They are guiding to 5x leverage at close and 3x 24 months later. If you want to value the new entity at 10x EBITDA, you would get $43.50 per DISC share in mid 2024. The better stat is that FCF is so robust that such a price is only 11x FCF (a 1x spread between those metrics is pretty rare) so buybacks will be huge, just as they have been at legacy Discovery historically. 12x EBITDA and 14x FCF gets you to $56 per Newco share by my math, which might be the high end/bull case.

cheers - that makes sense on the de-levering.  

[LearningMachine]

6 hours ago, hasilp89 said:

presentation on the deal and call this morning.

Rough value for DISCK shareholders - 10x on PF 23 $14B EBITDA -  $140TEV. less $15B of DISCK Debt less $43M of ATT Debt - Equity value of $82M - 29% is DISCK = $24M - similar to today? Assuming I'm missing something.

https://s27.q4cdn.com/187472364/files/doc_presentations/2021/ATT-Discovery-WM-05172021-FINAL.pdf

 

 

@hasilp89, did you mean equity value today is $24B?  How were you getting that?

Can someone double-check my math here?

So, Discovery equity as of today is $16.69 Billion. 

• If we believe their numbers of 2023E adjusted EBITDA of $14B (which assumes synergies), Enterprise value then at 10x EBITDA would be $140B at 2023E.
• If we believe their numbers of 3x EBITDA Debt, Debt then would be $42B.
• Total Equity then would be $98B.
• 29% owned by Discovery shareholders would be $28.42B

Going from $16.69B to $28.42B is 70% upside in about two years if we believe their numbers, and everything goes according to their plan. 

Did I miscalculate anything above? 

 

Edited May 17, 2021 by LearningMachine

[ander]

11 minutes ago, LearningMachine said:

@hasilp89, did you mean equity value today is $24B?  How were you getting that?

Can someone double-check my math here?

So, Discovery equity as of today is $16.69 Billion. 

• If we believe their numbers of 2023E adjusted EBITDA of $14B (which assumes synergies), Enterprise value then at 10x EBITDA would be $140B at 2023E.
• If we believe their numbers of 3x EBITDA Debt, Debt then would be $42B.
• Total Equity then would be $98B.
• 29% owned by Discovery shareholders would be $28.42B

Going from $16.69B to $28.42B is 70% upside in about two years if we believe their numbers, and everything goes according to their plan. 

Did I miscalculate anything above? 

 

There's preferred stock which is an additional 165 mil shares or so.